Skimming Pricing
Skimming pricing means launching at the highest price the earliest buyers will pay, then lowering it in stages as you move down the demand curve.
Four stages move left to right, the price stepping down at each one from early adopters to the mass market.
Reach for this when…
- You have a genuinely new product and no direct competitor yet.
- R&D costs were heavy and you need to recoup them before rivals copy you.
- Early buyers care more about being first than about price.
How to run it
- Confirm the product is different enough that comparison shopping won't kill the price.
- Set the launch price at the top of what committed early buyers will pay.
- Watch competitor entry and demand as the signal to move, not a calendar date.
- Lower price in planned steps as you open each new buyer segment.
- Stop skimming once a rival can match the product at a lower price.
A worked example
Situation. Valentina Hernandez built Hernandez Audio, a small headphone maker in Guadalajara, Mexico, and had one genuinely new feature: a driver nobody else had licensed yet.
Applied. She priced the first run high, sold directly to the audiophile forums who wanted it first, and only dropped price once a rival announced a comparable driver.
Result. The first 2,000 units funded the second production run outright, and by the time she cut price to enter mainstream retail the R&D was already paid off.
The catch
Skimming only works while the product stays hard to copy - if a rival can replicate it fast, you lose the window before you've recouped anything. It also signals to the market that price will fall, which trains customers to wait rather than buy at launch. And it can box you into a premium image that's awkward to shed later.
If you don't know how long your lead lasts, you're guessing at the skim window, not managing it.
Origin: Joel Dean, who set out skimming versus penetration pricing in his 1950 article 'Pricing Policies for New Products'.